KC startup players react to proposed cut of Kansas angel tax credits

With Kansas' angel investor tax credit on the chopping block, notable players in the Kansas City startup community are going to bat for the legislation. Kansas Gov. Sam Brownback (left) has proposed a 2013 budget that includes the elimination of the state's angel investor tax …

With Kansas’ angel investor tax credit on the chopping block, notable players in the Kansas City startup community are going to bat for the legislation.

Kansas Gov. Sam Brownback (left) has proposed a 2013 budget that includes the elimination of the state’s angel investor tax credit. The angel credit, enacted in 2004, allows individuals investing in qualified companies to get back half of their investment, to $50,000 a company. Two stories in Friday’s Kansas City Business Journal featured insights from area business leaders on the implications of cutting the tax credit. 

One of the stories in the Business Journal, by reporter David Twiddy, quantified the angel credit’s impact in terms of companies, jobs and investment it helped bring to the state: 

In fiscal 2010, the last year for which numbers are available, 287 investors claimed $5.7 million in credits to invest in 36 companies. Those companies raised a total of almost $38 million in capital, creating 193 jobs and preserving 45 jobs with an annual payroll of $36.6 million.

In the other story, written by reporter Alyson RaletzGreg Kratofil (left), an attorney with Polsinelli Shugart who works extensively with tech startups and did work for Google as the company considered Kansas City for its ultra high-speed network, said cutting the angel credits would stymie potential activity surrounding the arrival of Google Fiber.

“It seems very counter to having a billion-dollar investment in your area — and you take away something that helps fund those innovations and those ideas, Kratofil said.”

Twiddy’s story provides the perspectives of a couple other supporters of the credits. Joel Wiggins, the CEO of the Enterprise Center of Johnson County, talked about the credit’s role in drawing businesses to the state: 

“It attracts companies to Kansas that might not otherwise come here, both in life sciences and in the technology marketplaces,” Wiggins (left) said. “We never encourage (people) to invest because of tax credits, but all things being equal, a company that has a tax credit will get the investment while a company that doesn’t won’t.”

Gary Fish, the founder and CEO of FishNet Security and an active angel investor, offered his take on the credit, which has helped attract out-of-state investors because credits are transferable.

“I am out there investing in companies, and if I can get a tax credit it’s going to help sway my decision of where I put my money and what companies I put my money in,” Fish (below) said. “Missouri’s looking at programs in this area. Kansas would in a sense be going backward.”

Meanwhile, Brownback spokeswoman Sherienne Jones-Sontag said that, though popular, the angel credit needs to be cut to help simplify the state’s tax code and, ultimately, make Kansas more attractive to businesses.

“The governor’s goal with his tax proposal is to make our state more competitive, and studies have shown that lowering your individual income tax rates is one of the best ways to do that.”

Silicon Prairie News will have more on the status of Kansas’ angel tax credit as the story develops. In the meantime, you can find the complete Business Journal stories below:

Image credits: Photo of Brownback from ks.gov. Photo of Kratofil from polsinelli.com. Photo of Wiggins from ecjc.com. Photo of Fish from fishnetsecurity.com

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